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Bankrupt PennCorp sells off insurance companies

In an effort to raise more than $260 million to

pay off its creditors, PennCorp Financial Group Inc. is selling two of its life insurance companies to Reassure America Life Insurance Co., a subsidiary of Swiss Reinsurance Co.

Recent developments for PennCorp
  • Trading of PennCorp ceased on the Big Board on Jan. 7.
  • Standard & Poor's, an insurance company rating service, downgraded PennCorp on Feb. 8, from "CC" to "D," reflecting PennCorp's "weak financial structure."
  • PennCorp unloaded six companies: American-Amicable Life Insurance Co. of Texas, Occidental Life Insurance Co. of North Carolina, Pioneer American Insurance Co., Pioneer Security Life Insurance Co., Security Life & Trust Insurance Co., and Southwestern Life Insurance Co. for more than $357 million in cash.

Reassure America will pick up Security Life & Trust Insurance Co. and Southwestern Life Insurance Co. for $260 million in cash. The sale is subject to bankruptcy court approval and is expected to be finalized at the end of the first quarter of 2000.

PennCorp, a Dallas-based insurance holding company, voluntarily filed for bankruptcy on Jan. 10, 2000. It then completed the sale four of its other insurance companies — American-Amicable Life Insurance Co. of Texas, Occidental Life Insurance Co. of North Carolina, Pioneer American Insurance Co., and Pioneer Security Life Insurance Co. — to Thoma Cressey Equity Partners on Feb. 4, 2000, for $97 million in cash.

PennCorp reports it owes approximately $115 million to various creditors, plus another $65 million to banks. The company anticipates any surplus after satisfying creditors will be distributed among its preferred stockholders. Common stockholders will get nothing from the sales.

President and CEO of PennCorp, Keith Maib, says that the company's bankruptcy will have "no material impact on the day-to-day operations of the insurance [companies], and no material impact on their policyholders." Maib says that the six insurance companies will continue to service policyholder claims and sell life insurance products throughout the bankruptcy proceedings.

Jim Davis, a spokesperson for the Texas Department of Insurance, confirms that policyholders with the six insurance companies won't feel any effects of PennCorp's bankruptcy.

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